Chris Cuffe
, a veteran of Australia’s $2 trillion wealth industry, reckons his Third Link Growth Fund is a win-win proposition. Investors reap the benefits of Cuffe’s investment skills, while six charities receive a regular income because the managers and other ­service providers waive their fees.

Cuffe, chairman of
UniSuper
, a ­Melbourne-based superannuation behemoth with 30 years’ or so experience in financial services, knows a thing or two about investing and believes he has assembled a fine group of stock-pickers for Third Link, effectively a “fund of funds".

Not for him managers who do little more than huddle around an index. He wants professionals who actively manage their portfolios for the benefit of investors.

“You won’t find, in my fund, a ­manager that hugs an index. You don’t get the performance. I’m competitive by nature. I like concentrated port­folios," he says.

Cuffe chooses managers on the basis that they have the ability to outperform their benchmark by 4 per cent a year after fees, over rolling five-year periods.

Preference for the smaller end of town

There is a bias towards small- and mid-cap managers.

“Those markets are less well researched. The managers are more likely to discover gems," says Cuffe, who in previous lives ran Colonial First State investments and Challenger Financial Services.

Third Link, which this month ­celebrates its fifth birthday, recorded an annual rise of 7.5 per cent, comfortably above the underlying index rise of 3.8 per cent, after fees, between June 2008 and February 2013.

Lower interest rates will fuel demand for shares

Cuffe could be described as ­cautiously optimistic about the direction of sharemarkets. He argues the “tail risks" around the world are diminishing “by the day", a trend that is gradually boosting confidence in equities.

“People are starting to get into the comfort zone about investing in ­equities," he says.

Any further fall in interest rates could provide further impetus for investors to look more favourably on shares, given the need to beat inflation.

That said, before share prices can lift much further, investors will want to see a stronger recovery in earnings. Furthermore, Cuffe is more cautious than optimistic when it comes to Europe.

“Not only are they getting over their current problems, but they are working out what will work, going forward. It’s very difficult. It’s going to be real slow," says the UniSuper chairman.

Third Link is now a 100 per cent ­Australian equity product.

A charitable edge

But it wasn’t always, having started life as a diversified growth fund. The problem, Cuffe found, was that investors preferred to do the asset allocation themselves and wanted a manager to do just that – manage.

So 15 months ago, Third Link became a 100 per cent equity vehicle, fortuitous timing, as it turned out, given the recent rally in sharemarkets.

The fund is currently about $54 million, well short of Cuffe’s target of $150 million. At that point, he will close the vehicle, on the grounds that it will be in a position to donate $200,000 a month to the group of charities, up from $60,000 per month.

Most of the investors are self-­managed superannuation schemes, although the Cuffe family’s private ancillary fund is also a “significant" investor.

Instead of going to the managers and other service providers, the 1.4 per cent investment management fee paid by investors ends up financing the charities, which include the Australian Indigenous Mentoring Experience, the National Centre for Childhood Grief and Foundation for Rural and Regional Renewal.